METROFILE was once on the verge of bankruptcy but the directors slowly brought the company back to life and it is now not only growing revenue (+11.5%) and HEPS (+18.8%) in the six months to end-December, but also seriously strong cash generation up 42.9%, which saw the dividend increase 50%. The cash being generated is also being used to pay down the debt and the debt/equity ratio now stands at 33.1% vs 55.1% a year ago and it was well over 100% a short while back.
The company’s business model is simple enough: build a large warehouse and store documents for businesses that are required by law to keep a large number of documents for prescribed periods. Aside from an initial upfront cost of a new warehouse, the running expenses are fairly modest and income is pretty much protected. Sure, a business can move to another document storage company, but trust and reliability are critical here and Metrofile is crossselling other services to existing clients.
The Nigerian expansion was terminated but the company still has a presence in six other African countries, and management remains cautious about expansion (the near bankruptcy makes it extra cautious – a good thing).